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House Speaker Mike Chenault said that if the Permanent Fund is protected by the Alaska Constitution, lawmakers have few choices. "It means one thing," he said. "Taxes."
Courtesy HouseMajority.org

JUNEAU -- An attempt to protect Alaska’s cherished Permanent Fund Dividend by putting it in the Alaska Constitution may have gotten a boost Thursday when some top legislators talked of using the Alaska Permanent Fund's profits -- from which dividends are paid -- to balance the state's budget.

Other potentially controversial ways of balancing ever-tighter budgets include slashing state agency budgets and cutting municipal revenue sharing for cities and boroughs.

Alaska is facing billion-dollar budget deficits in this and future years, and House Democrats said the PFD needs to be protected.

"Now is the time to send a clear message that using the dividend to fill those gaps is off the table," said Chris Tuck, D-Anchorage, House minority leader.

Further cuts from House?

But at a press conference Thursday, House Speaker Mike Chenault, R-Nikiski, and others warned about the risks that approach could have for the state. It may force the state to impose sales or income taxes, he said.

Alaska is already facing cuts this year. Rep. Alan Austerman, R-Kodiak, said Gov. Sean Parnell submitted a hold-the-line budget but predicted that the House would cut the operating budgets of some state departments. Next year, he said, entire programs are sure to face cuts.

"We're going to have to see a continued decline in the size of government to compensate a little bit for our shortfall in revenues," he said.

Eventually, budget writers are going to have to look beyond cutting services and find other places to get money. That could come from money that's now shared with communities, but legislators might choose to take it from the PFD as well, Austerman said.

'Everything on the table'

"We are putting everything on the table," he said. "We're having conversations about the Permanent Fund, we're having conversations about how much money the municipalities are getting from the state of Alaska."

Austerman said that because Alaskans became accustomed to receiving dividends over the last 30 years, touching that would likely be the last thing to happen. At the same time, Alaskans have also become accustomed to not paying taxes, he said.

Another savings option could be to pull back on phased projects that may have had money allocated to them earlier, but may require much more to complete.

Chenault said he opposed the Democratic proposal, because it could take away legislative options for dealing with reduced revenues. "It gives you less choices," he said.

Permanent Fund or taxes?

And if the state can't look to Permanent Fund earnings to balance budgets, it could be left with only one choice.

"If we get to the point where the state government exceeds our revenue stream, where are we going to go to get the money?" he asked.

If the PFD is required by the Alaska Constitution, there would only be one choice.

"It means one thing: taxes," he said. "Do you want to institute a state income tax?" Chenault said.

Rep. Les Gara, prime sponsor of the legislation to put the dividend in the Constitution, predicted that budget shortfalls would lead to claims on Permanent Fund earnings. His bill is House Joint Resolution 17.

“With a rollback of oil revenue, there is a great fear that some politicians will seek to cut the dividend,” Gara said. "Instead, we should protect the dividend and seek a fair share of our oil.”